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It is a good thing investors will have the entire weekend to recover from their New Year’s celebrations, because 2010 is starting with a bang, at least in terms of economic data. Undoubtedly, the week’s most critical release will be Friday’s employment report, where excitement is building that payrolls could show their first monthly advance since gaining 120K jobs in December 2007. What a difference a year makes, considering it was announced last year that payrolls fell -524K December. Leading up to this release data-centric investors will analyzing both the ISM manufacturing and non-manufacturing’s employment indices along with the ADP employment report for clues toward Friday’s release.

Other significant indicators this week include manufacturing ISM on Monday, pending home sales on Tuesday, non-manufacturing ISM and FOMC minute on Wednesday, and jobless claims and chain store sales on Thursday. The manufacturing ISM should remain above 50 for the fifth consecutive month; however, weakness in some of the Fed’s regional manufacturing survey could place some negative pressure on the index leading to only a marginal gain from November’s release. The FOMC minutes should prove to be a non-market moving event simply providing further details behind the Fed’s eventual exit strategy and the termination of its unprecedented accommodative policies. Pending home sales should help provide some insight behind the health of home sales after the would-be expiration of the first time home buyer tax credit on November 30th. Finally, chain store sales on Thursday will provide one of the first detailed looks at the holiday shopping season.

Fed speakers will be relatively active next week with Chairman Bernanke, Vice Chairman Kohn, and Atlanta Fed President Lockhart opening the week up on Sunday participating in a panel discussion for the American Economic Association in Atlanta. On the earnings front, Bed Bath & Beyond (BBBY), Constellation Brands (STZ), Family Dollar Stores (FDO), and Monsanto (MON) are all expected to report this week. Also, look for headlines from the 2010 Consumer Electronics Show that starts next week and could attract over 100K visitors.

Here is the rest of this week’s US calendar:

Monday, Jan. 4

10:00 a.m. EST: December’s ISM Manufacturing Index (Risk: Neutral, Market Reaction: Significant): The Manufacturing ISM Index should remain above 50 for the fifth consecutive month, but experience only a marginal gain from November’s reading of 53.6. Weakness in some of the Fed’s regional surveys could place downward pressure on this month’s release; however, some of this pressure should be alleviated by the fact that in November the ISM New Orders index came in at a relatively robust 60.3. It will be important to continue monitoring the ISM’s new orders, employment, and prices paid index for implications toward the future and other sectors of the economy. The current Bloomberg consensus forecast is for an ISM reading in December of 54.8, compared to 53.6 in November.

10:00 a.m. EST: November’s Construction Spending (Risk: Neutral, Market Reaction: Moderate): Construction spending will likely remain weak in November, and downward revisions to past data are likely to continue. Construction spending was unchanged in October, but after revisions declined by -1.6% in September. The current Bloomberg consensus forecast is for a decline in construction spending of -0.5%.

10:15 a.m. EST: Dennis Lockhart, the Atlanta Federal Reserve Bank President, will give a speech on government crisis response to the American Economic Association.

Tuesday, Jan. 5

December’s Motor Vehicle Sales (Risk: Neutral, Market Reaction: Moderate): Attractive dealer year-end incentives during December will likely help boost motor vehicle sales during the month. The current Bloomberg consensus forecast for domestic vehicle sales is an annual pace of 8.4 million units, compared to 8.2 million a month prior.

7:45 a.m. EST: ICSC-Goldman Store Sales (Risk: Neutral, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number rose +0.4% compared to an increment of +0.6% a week prior.

8:55 a.m. EST: Redbook (Risk: Neutral, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales. This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales. According to the Redbook store sales rose 1.9% last week on a yearly basis.

10:00 a.m. EST: November’s Factory Orders (Risk: Neutral, Market Reaction: Marginal): After rising 0.6% in October, factory orders should continue to rise in November on the back of relatively strong durable goods orders and refinery orders stemming from higher energy prices. The current Bloomberg consensus forecast is for a rise in factory orders of 0.4%.

10:00 a.m. EST: November’s Pending Home Sales (Risk: Downside, Market Reaction: Significant): This release should help quantify the impact of what would have been the expiration of the first time homebuyer tax credit on November 30th. It is expected that a wave of buyers rushed to close their purchases before the end of the month to qualify for the first time home buyer tax credit. Mortgage applications have recently been on the decline to supporting this theory. It is expected that an extension/expansion of the program will eventually bring a new group of home purchasers into the market.

Wednesday, Jan. 6

7:00 a.m. EST: MBA Mortgage Applications (Risk: Neutral, Market Reaction: Marginal): The MBA was closed last week so this week’s release will include two weeks of data. This index, which tracks new mortgage applications tend to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Applications fell 10.7% two weeks ago after rising 0.3% a week prior. Refinance applications fell 10.1%, while purchase applications dropped -11.6%. A wave of buyers, filling out multiple mortgage applications, that were looking to take advantage of the first time home buyer tax credit–originally set to expire on Nov. 30th–have already completed their transactions, and have recently reduced the demand for mortgages. However, the recent extension of the first time home buyer tax credit should eventually bring a new set of buyers into the market, which could help support the purchase index over the coming months.

7:30 a.m. EST: December’s Challenger Job Cut Report (Risk: Neutral, Market Reaction: Marginal): This index measures the number of announced corporate mass layoffs, but does not take into account the timing of the actual layoffs. Meaning layoffs announced in November may not actually take place until December, or even take place slowly over an extended period of time. I anticipate this report will show continued improvements as companies have mostly completed large scale layoffs.

10:00 a.m. EST: December’s ISM Non-Manufacturing (Risk: Neutral, Market Reaction: Significant): After unexpectedly falling below 50 in November, investors will have the opportunity to decide whether this is the beginning of a new trend or a one off event. Investors will also be paying close attention to the non-manufacturing ISM’s employment index, which could have some sway over the whisper number ahead of Friday’s employment report. The current Bloomberg consensus forecast is for a reading of 50.4 compared to 48.7 a month prior.

10:30 a.m. EST: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories. Large unanticipated swings in this index could have a significant impact on energy prices. Last week this report showed a decline of -1.5 million barrels versus a drop of -4.9 million barrels a week prior.

2:00 p.m. EST: FOMC Minutes (Risk: Neutral, Market Reaction: Significant): The FOMC minutes should provide additional details behind the Fed’s eventual exit strategy and the termination of its unprecedented monetary easing. However, I think it is still too early in the year to anticipate anything tremendously market moving from this report.

Thursday, Jan. 7

Chain Store Sales (Risk: Neutral, Market Reaction: Moderate): The market will be looking closely at this report as it is the first detailed report covering the holiday shopping season. Early reports have indicated that the holiday shopping season may have been more robust than some had anticipated, but considering last year’s base this may not be as positive as it sounds. Nevertheless, higher is better; I anticipate the strongest results will come from discount retailers as consumers grow increasingly budget conscious.

6:00 a.m. EST: Monster Employment Index (Risk: Neutral, Market Reaction: Marginal): Given the added significance of this week’s employment report this typically overlooked employment index could garner some extra attention. This survey conducted by Monster Worldwide Inc. measures online job demand. According to the company, “The trend in online job availability has been largely flat for most of the year and remained so in November,” said Jesse Harriott, senior vice president and chief knowledge officer at Monster Worldwide. “While job losses have continued to ease, businesses remain cautious about adding to their payrolls in light of sustained economic uncertainty.”

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell 22K last week to 432K, after falling 28K a week prior. It is important to note that the Christmas holiday, and the seasonal adjustment around it, could be skewing last week’s data. The four week moving average improved to 460,250 from 465,250. Improving initial jobless claims are indicative of fewer job losses in the BLS’s monthly employment report; however, the job situation will still get worse before it gets better.

1:00 p.m. EST: Tom Hoenig, the Kansas City Federal Reserve Bank President, will give a speech on the economic outlook.

4:30 p.m. EST: Fed Balance Sheet & Money Supply—Current Week’s Release (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. The Fed’s balance sheet shrank marginally last week to US$2.219trn from US$2.221trn, due to marginal reduction in the Fed’s agency MBS. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

Friday, Jan. 8

8:30 a.m. EST: December’s Employment Situation (Risk: Neutral, Market Reaction: Very Significant): The current Bloomberg consensus is for a change in payrolls of 0, versus a decline of -11K in November. Individual forecasts range from -50K to +40K. A steady reduction in the number of initial unemployment claims bodes well for improving payroll data, but I think we could see an eventual reversal of seasonal hires as the holiday shopping season comes to a close in the months ahead. I will be paying close attention to the index’s temporary employment index, which recently has been improving, and is a good forward looking indicator toward payrolls. I continue to believe, despite a potentially positive reading in December, the employment situation will get worse before it stabilizes and begins to improve, albeit gradually, in 2Q10. The current Bloomberg consensus forecast for the unemployment rate is 10.0%, unchanged from November.

10:00 a.m. EST: Wholesale Trade (Risk: Neutral, Market Reaction: Marginal): This indicator measure the level of inventories and sales by US wholesalers. It is generally considered a good forward looking indicator toward trends in consumer behavior as stores typically ramp up inventories prior to any anticipated increment in sales. It is important to note that this data is on a two month lag.

3:00 p.m. EST: November’s Consumer Credit (Risk: Neutral, Market Reaction: Moderate): I anticipate that little has changed in this sector, and we should continue to see a decline in consumer credit in the face of consumers less willing to borrow and banks less willing to lend. November would be the tenth consecutive month consumer credit has declined. In October consumer credit declined by -$3.5 billion, after declining by a revised -$8.9 billion in September. The current Bloomberg consensus forecast is for a decline of consumer credit outstanding of -$5.0 billion for November.

The ISM non-manufacturing employment index fell to 41.1 in September from last month’s 44.3. This should take away any chances for upward revisions to Friday’s payroll release. The standalone business index finished at 55.2 from 55.1 a month prior, while the prices paid Index jumped to 53.0 from 48.8. The headline number came at 50.6, which was below both market expectations (51.9), and the previous month’s release (50.9). Despite being somewhat disappointing, what is important is that the number remained above 50.

September’s non-manufacturing ISM came in this morning at 50.9, compared to a previous reading of 48.4. This is the index’s highest reading since May 2008. this was inline with market expectations. September’s Employment Index rose to 44.3 from 43.5 last month. The standalone Business Index fell slightly to 55.1 from 51.3. The Prices Paid Index took a significant dip to 48.8 from 63.1. The new orders index also moved about 50 finishing this month at 54.2. The new orders index finished below 50 for 11 consecutive months. Overall, this is a positive report indicating continued improvements in the US service sector.

Based on last week’s negative performance on the back of several pieces of melancholy economic news, some investors may argue September has come late this year. Looking ahead, we have a pretty quiet week on the data front, which may cause investors, still trying to heal from last week’s wounds, to place added emphasis on second tier indicators. This week’s most important releases will be non-manufacturing ISM on Monday, consumer credit on Wednesday, chain store sales and jobless claims on Thursday, and international trade on Friday. Over the coming weeks investors will continue gauging the magnitude of the pullback on the overall economy stemming from the cessation of ‘Cash for Clunkers’, along with potential damages from the upcoming expiration of the first time home buyer tax credit.

This week also brings with it the start of 3Q09 earnings, with Alcoa, Pepsi, Costco, and Yum all scheduled to announce this week. Also this week the Senate Finance Committee is expected to vote on the Baucus Bill for healthcare reform.

Over this weekend G7 finance ministers and central bankers are meeting, and will likely release a communiqué that has the potential to generate some headlines. This will be followed up by IMF/World Bank meetings in Turkey on Tuesday and Wednesday.

Here is the rest of this week’s US calendar:

Monday October 5th:

10:00AM: ISM Non-Manufacturing (Risk: Neutral, Market Reaction: Significant): The non-manufacturing ISM should continue its upward momentum, potentially moving above the 50 breakeven point with a Bloomberg consensus forecast of 50.0 compared to 48.4 in August. But, August’s new orders index of 49.9 should decrease the odds of any large jump in the headline number. This month it will be important to pay close attention to the forward looking new orders index and the prices paid components. Additionally, given the lack of data this week and last week’s negative surprises more emphasis than usually may be placed on this release as the market continues to search for the light at the end of the tunnel.

Tuesday October 6th:

7:45AM: ICSC-Goldman Store Sales (Risk: Negative, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number indicated a weekly increment of 0.1% in store sales compared to a decline of -2.0% a week prior.

8:55AM: Redbook(Risk: Negative, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales. This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales. According to the Redbook store sales were down -2.2% last week on a year over year basis.

9:45AM: Thomas Hoenig, Kansas City Federal Reserve Bank President, is giving a speech at an economic forum sponsored by the bank’s Denver branch.

Wednesday October 7th:

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Last week’s data showed a decline of 2.8% despite lower mortgage rates. The refinance index fell 0.8%, while the purchase index dropped 6.2%.Refinances made up 65.3% of all applications last week.

10:30AM: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories. Large unanticipated swings in this index could have a significant impact on energy prices. Last week this report showed a rise of 2.8mn barrels versus a rise of 2.8mn barrels a week prior.

3:00PM: Consumer Credit (Risk: Neutral, Market Reaction: Moderate): August consumer credit should once again show a significant decline due to bank’s unwillingness to lend and apprehensive consumers’ hesitations toward borrowing. The current Bloomberg consensus forecast is for a decline in credit of –US$8.5bn, versus –US$21.6bn in July. This would be the 7th consecutive month of declines for the index. The chances of a consumer led recovery seem even more remote when you take into account for the dwindling consumer credit market.

Thursday October 8th:

Chain Store Sales (Risk: Neutral, Market Reaction: Significant): Same store sales may have improved slightly in September from August. We should continue to see discount chains outperforming luxury chains as consumers become increasingly budget conscious. It is important to note that Wal-Mart is no longer included in this reelase.

8:30AM: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims rose last week by 17K to 551K. Initial claims should demonstrate marginal improvements over the coming months as weakness in the labor market slowly abates. But, make no mistake about it these levels are still uncomfortably high, and will continue to adversely impact the US payroll data for some time. In fact using a simple regression analysis claims at their current levels would indicate a decline in payrolls of roughly 480K, however, recently this model has been exaggerating the actual effect on payrolls, but nevertheless is a cause for concern going forward. The current Bloomberg consensus for this week’s initial claims release is 540K. But, initial claims could face some upward pressure during the month as an increased number of lay-offs were announced to take place.

10:00AM: RBC Cash Index (Risk: Neutral, Market Reaction: Marginal): The Royal Bank of Canada’s Consumer Attitudes and Spending by Household (CASH) Index is a monthly measure of consumer attitudes toward investing, the economic outlook, and personal finances. This index does hold some importance in so much that it tends to demonstrate a pretty significant correlation with the consumer sentiment index being released next week.

10:00AM: Wholesale Trade (Risk: Neutral, Market Reaction: Moderate): This indicator measure the level of inventories and sales by US wholesalers. It is generally considered a good forward looking indicator toward trends in consumer behavior as stores typically ramp up inventories prior to any anticipated increment in sales. However, continued weakness in the labor market coupled with no indication of a rebound in consumer spending this index could face some negative pressure. It is also important to note that this data is on a two month lag.

4:30PM: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. The Fed’s balance sheet declined last week to US$2.123trn from US$2.141trn a week prior. This was the first decline in eight weeks. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

8:45PM: Thomas Hoenig, Kansas City Federal Reserve Bank President, is giving a speech at an economic forum sponsored by the bank’s Oklahoma City branch.

Friday October 9th:

8:30AM: International Trade(Risk: Neutral, Market Reaction: Moderate): Higher energy import prices will likely lead to further deterioration of the US trade balance with the Bloomberg consensus forecast projecting a decline of –US$33.0bn for August, compared to –US$32.0bn a month prior. It will be important to monitor the levels of US exports, as a weakening US$ could have helped increase international demand for US products. Also, during this time of year imports would typically experience some increments due to retailers stocking up for the holiday season, however, given depressed consumer demand and a morose outlook for the holiday season this effect will likely remain subdued.

The composite non-manufacturing ISM index rose to 48.4 from 46.4 in July, compared to a consensus forecast of 48.1. The last time the index was at or above the break-even point of 50 was September 2008. But, recent trends imply that the index could move above that point in the coming months. The employment index rose to 43.5 from 51.5. The standalone business index rose above 50 finishing at 51.3 versus 46.1, a month prior. the prices paid Index rose to 63.1 from 41.3 in July. The new orders index came in just below 50 at 49.9.

Following last week’s mixed data, the market will be searching for indications of the strength and timing of a US economic recovery — and there will be plenty of places to look. In contrast to the relative quiet of the past several weeks, a slew of economic indicators pertaining to jobs and manufacturing should be stealing the spotlight away from earnings. The coming week’s biggest highlights are likely to be Monday’s ISM manufacturing report and Friday’s ever important employment situation release. Companies reporting earnings this week include Cisco, Proctor and Gamble, Kraft, MGM, News Corp, CBS, and Prudential. After last week’s record US Treasury auctions, on Monday the Treasury Department will be releasing a quarterly update on its upcoming borrowing requirements; given the level of the US deficit and continued efforts to bolster the economy, the amount of future debt will probably be quite significant and could cause some reaction in the market.

I want to take a moment to remind everybody that while the number in the headline often garners the most attention, it’s the details that tell the true story. There were a couple instances last week where a data release immediately shifted sentiment in one direction, but as the details behind the report were digested, said sentiment quickly took an about face. This was especially true for what on the surface appeared to be a very negative durable goods release. So let’s take this as a lesson, and be sure to pay close attention to the details behind this week’s data.

Monday August 3rd:

Motor Vehicle Sales (Risk: Positive, Market Reaction: Moderate): This release could face some upward pressure due to the effects of the US Government’s new “Cash for Clunkers Program”, which thus far appears to be a success.

10:00AM: ISM Manufacturing Index (Risk: Negative, Market Reaction: Significant): Despite an easing recession, the ISM could face some weakness on last month’s weak new orders index. But, low inventory levels could help to offset a portion of this effect. The current Bloomberg consensus for the ISM is 46.5, versus last month’s release of 44.8. It will also be important to keep an eye on the details of the report, especially the employment, new orders, inventories, and prices paid indices.

10:00AM: Construction Spending (Risk: Negative, Market Reaction: Moderate): Gains in residential construction will likely be offset by declines in commercial construction on the back of lower corporate profits. The current Bloomberg consensus for construction spending is a monthly change of -0.5%, compared to a previous reading of -0.9%.

Tuesday August 4th:

7:45AM: ICSC-Goldman Store Sales (Risk: Downward, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales. Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure. Last week’s number indicated a 1.0% gain in store sales over the previous week.

8:30AM: Personal Income and Outlays (Risk: Neutral, Market Reaction: Moderate): Given the timing of this release—right after the 2Q09 advanced GDP release—the report loses some of its significance. Nevertheless, the report will likely show a moderate increase in the personal consumption expenditure for June, stemming from higher energy prices. Personal income will likely exhibit significant declines on the back of Weakness in the labor market and a decline in government payments. The current Bloomberg consensus forecast for the change in June’s personal income is -1.1%, compared to the previous month’s reading of 1.4%. The forecast for the monthly change in June’s personal consumption expenditure is 0.3%, or unchanged from the previous month.

10:00AM: Pending Home Sales Index (Risk: Positive, Market Reaction: Moderate): A strong number in this index would continue to support the current rebound in the U.S. housing market, which could have a moderate impact on trading. Despite the fact that not all pending home sales turn into actual sales, this index is considered a good forward looking indicator toward housing activity.

Wednesday August 5th:

Chain Store Sales (Risk: Negative, Market Reaction: Moderate): Chain store sales probably came under pressure again last month, as consumers reduced spending on the back of weakness in the labor market. In fact, a recent survey by the National Retail Federation found that families this year will be spending on average US$549 versus US$594 last year on back to school goods. This along with other negative factors should adversely impact this summer’s retail sales.

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index. Last week the the overall index fell 6.3%; while the refinance index decreased by 10.9% on rising, but still relatively low mortgage rates.

8:15AM: ADP Employment Report (Risk: Neutral, Market Reaction: Moderate/Significant): The ADP employment report is typically considered a good indicator of the payroll data released later in the week, so a big swing in these data could shift expectations for the employment data released on Thursday and thus significantly affect trading.

10:00AM: Factory Orders (Risk: Neutral, Market Reaction: Significant): June’s decline in durable goods orders could place some downward pressure on this index, however, an increase in June’s nondurable component, stemming from increased petroleum orders could offset a portion of that decline. The current Bloomberg consensus for June’s factory orders is -0.9% m/m, compared to a previous reading of 1.2%

10:00AM: ISM Non-Manufacturing Index (Risk: Upward, Market Reaction: Significant): July’s non-manufacturing ISM will likely remain relatively unchanged. But, it will be important to focus on the prices paid index, which took a big jump last month, and the new orders index, which tends to be a forward-looking indicator for the primary business activity index. The current Bloomberg consensus forecast for July’s non-manufacturing ISM is 48.2, compared to June’s reading an 47.0, and still below the breakeven point of 50.

10:30AM:EIA Petroleum Status Report(Risk: Neutral, Market Reaction: Moderate): This report indicates domestic petroleum inventories, which could have a significant impact on the energy sector. Last week this report showed an unexpected increase in crude oil inventories, which led to a drop in oil prices. (Please see this brief discussion piece on FiatEconomics.com describing the potential effect of inventories on oil prices.)

Thursday August 6th:

8:30AM: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial Claims rose 25K to 584K, last week as the index continues to adjust for erroneous seasonal adjustment factors stemming from early auto plant closures. The good news these effects by now likely been washed out, so we should once again be able to rely on claims as a being an accurate indicator of current conditions . On that note, last week’s claim number was still far below the 4wk moving average–from before the incorrect seasonal adjustments– which in my view shows there has been some improvement in the initial claims data. But, given the still elevated numbers it will continue to have an adverse effect on payroll data. The current Bloomberg consensus for this week’s initial claims number is 575K.

4:30PM: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness. The market will pay close attention to the reserve bank credit component, which measures factors supplying providing reserves into the banking system. Last week the Fed’s balance sheet moved back below US$2trn to US$1.985trn. The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help bring down interest rates.

Friday August 7th:

8:30AM: Employment Situation (Risk: Neutral, Market Reaction: Very Significant): What translates into improvements for jobless claims data, should help reduce some of the downward pressure facing US payroll data. Nevertheless, we will likely still see a considerable decline in US payrolls with the current Bloomberg consensus forecast indicating a decline of 300,000, compared to last month’s fall of 467,000 jobs. The unemployment should also continue to rise with the current consensus forecast indicating a rate of 9.7%, compared to last month’s 9.5%. It is high likely that we could see the unemployment rate edge above 10% before the end of the year. The market will be paying very close attention to this release, so any major surprises could hold significant consequences in trading.

3:00PM: Consumer Credit (Risk: Neutral, Market Reaction: Moderate): Consumer credit probably continued to decline in June, as consumer’s paid off credit cards and reduced borrowing. The current Bloomberg consensus is a monthly decline of US$4.2bn

The Non-Manufacturing ISM came in at 47 compared to the consensus forecast of 46.7. This signifies the sector is still contracting, but at a slower pace than in May, which had a reading of 44.0. This was the index’s best showing in 9 months. The new orders index, which tends to be forward looking rose by 4.2 percentage points to 48.6. The prices index showed the sharpest increase of 6.8 percentage points to 53.7 percent in June. This is the prices index first positive reading since October 2008. This should help to quell any ongoing fears of deflation, but could help to put concerns over inflation back on the table.

This week’s economic calendar is relatively quiet, especially compared to the hustle and bustle of last week.Monday’s non-manufacturing ISM report starts the week off, followed by Wednesday’s consumer credit report, Thursday’s jobless claims data, and Friday’s US trade statistics and consumer sentiment.The impact of this week’s non-manufacturing ISM report could be somewhat subdued since its release comes after June’s employment report; negating the importance the report’s employment index.But, significant declines or advances in the report’s business activity index could help shift market sentiment.This week’s big headlines, however, will likely be driven by the start of the 2Q09 earnings seasons, with Alcoa set to announce earnings on Wednesday.There is also a G8 summit taking place this week in Italy, which could produce some headlines.Here is this week’s US economic calendar:

Monday July 6th:

10:00AM: ISM non-manufacturing Index (Risk: Neutral, Market Reaction: Moderate/Marginal): The non-manufacturing ISM index will likely experience its third consecutive monthly rise.The current Bloomberg consensus for the index is 46.7 compared to last month’s reading of 44.0.The market would take any positive surprises to this index as good news echoing better than anticipated data in the manufacturing sector pointing towards a less severe recession.It will also be important to pay attention to non-manuf. ISM’s new order index, which tends to be a forward looking indicator for the primary business activity index.Since June’s employment report has already been released the employment index is essentially a non-factor.

Tuesday July 7th:

7:45AM: ICSC-Goldman Store Sales (Risk: Downside, Market Reaction: Marginal): This weekly index tracks same store sales at major US retailers, account for roughly 10% of total sales.Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure.Last week’s number indicated a 1.6% increment in store sales over the previous week.

Wednesday July 8th:

7:00AM: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index.A recent drop in refinancing activity caused this index to drop 18.9% on a weekly basis last week, while the level of mortgages to purchase new homes dropped by 4.5%.

3:00PM: Consumer Credit (Risk: Downside, Market Reaction: Marginal): Consumer credit has contracted quite severely over the past several months as saving rates rise and banks tighten consumer credit.The current Bloomberg consensus indicates a month over month change of –US$7.5bn compared to –US$15.7bn a month prior—the second biggest drop on record.Given recent deterioration in the employment situation and a drop in consumer confidence we could see this indicator disappoint.

Thursday July 9th:

Same Store Sales: (Risk: Downside, Market Reaction: Moderate): This monthly release breaks out same store sales data for individual retail chains.Like weekly the ICSC-Goldman Store Sales index, recent data supporting an increasing US savings rate and a worsening employment situation coupled with deep discounts at some stores, will likely place some downward pressure on same store sales.

8:30AM: Initial Claims (Risk: Neutral, Market Reaction: Significant):The current Bloomberg consensus forecast for initial claims is 610K versus last week’s number of 614K.It is likely that after Thursday’s disappointing employment data the market will become more sensitive to changes in claims, as it is an excellent forward looking indicator toward payroll data. I anticipate both initial and continuing claims data will improve as the month progresses.

Friday July 10th:

8:30AM: International Trade (Risk: Neutral, Market Reaction: Marginal/Moderate):The current Bloomberg consensus for the US trade balance is –US$28.8bn versus last month’s reading of –US$29.2bn.Recent increments in oil prices could add to the current deficit, while placing upward pressure on the import price index.

9:55AM: Consumer Sentiment (Risk: Neutral, Market Reaction: Marginal/Moderate):The current consensus on Bloomberg for the Reuters/University of Michigan Consumer Sentiment Index stands at 71.5 versus last month’s result of 70.8. The sentiment index is broken up into two parts, current conditions and future expectations.Investors are likely to focus more on this report after last week’s disappointing consumer confidence number. A positive or negative surprise in this index could impact the day’s trading.

10:00AM: Treasury SecretaryTim Geithner: Is set to testify before the House Financial Services and Agriculture Committees on derivatives regulation.This could create some headlines.

Contact Me:

Michael.McDonough@fiateconomics.com
Michael is an economist/strategist who has worked from Wall Street to Hong Kong primarily focusing on the U.S. and emerging markets. He has also written several columns. More

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Do TSA agents and prison guards go through the same training course? 2010-11-13

Bloomberg: "*IRISH FINANCE MINISTRY SAYS THERE ARE NO TALKS ON EU AID" 2010-11-12